Why the U.S. is beating us in the race to cut carbon

Canada has aligned its 2020 greenhouse gas reduction target to match that of the United States. Both countries pledged in early 2010 to reduce GHG emissions by 17 per cent below 2005 levels by the year 2020. Canada is currently forecast to get only about halfway to that target. The United States is now projected to either achieve its target or come close as it takes significant new actions on curbing coal emissions.

Why the difference in progress? Shared targets do not take into account different energy producing economies and electricity generating mixes. Despite the same emission reduction targets, alignment by Canada with the U.S. has actually stalled progress domestically. Its purpose as a political goal — to convey shared commitments — has in practice meant that Canada will neither exceed nor move faster than American efforts. But the U.S. is moving faster than anticipated. It’s time to rethink this approach.

Copenhagen in the winter of 2009 was meant to be the place and moment where the world took decisive action against climate change. It turned out differently. Gathering at the United Nations 15th Conference of the Parties meeting, leaders could not agree on a coordinated binding approach to reduce greenhouse gas emissions to a point where 2 degrees Celsius of warming — the projected level at which dangerous climate change would occur — would be avoided. Instead, the resulting Copenhagen Accord only required countries to make voluntary pledges to reduce emissions by 2020. Each country would submit its commitment to the UN before the end of January, 2010. Canada duly did so. It submitted the same target as the United States — of reducing emissions by 17 per cent below 2005 levels by 2020. Alignment was now policy.

Less than three years earlier, in the spring of 2007, climate policy alignment with the U.S. was not even on the radar screen. The federal government’s Turning the Corner plan made no mention of matching our climate policy with that of the United States. Heavy industrial emitters would be regulated and fuel efficiency standards for automobiles and energy efficient light bulbs were to be mandated as part of achieving a new, non-Kyoto Protocol GHG target. That target was to be 20 per cent below 2006 levels.

The rationale for alignment with U.S. climate targets was both political and economic. President Barack Obama’s election in November, 2008, with his commitment to fighting climate change, offered a political lodestone for the government of Prime Minister Stephen Harper to show, first, it cared about the issue and, second, to secure political cover in staying close to the new president’s efforts. The economic dimension was rearing itself already in the global recession then beginning in the wake of the financial meltdown. Environmental concerns faded as economic concerns rose in importance for voters in both the U.S. and Canada.

Embedded in this economic concern was the integrated nature of the Canadian and American economies. Competitiveness losses for emissions-intensive, trade-exposed (EITE) sectors (which represent about 11 per cent of Canadian emissions) and companies in Canada loomed large in the debate. Why do more or move faster than the Americans? With the collapse of momentum around global climate talks, alignment with the U.S. seemed a safe anchor for Canadian policy.

With alignment, Canada sidestepped its previous Turning the Corner plan, which proposed a possible cap-and-trade carbon emissions reduction scheme. Now, a sector-by-sector regulatory approach would be pursued. The first set of regulations reinforced the alignment approach by matching fuel efficiency standards for automobiles and, later, light trucks. Given the integrated automobile parts and manufacturing sector across the two countries, this made sense.

With most of our energy and electricity production already running clean, and with oilsands growth the single-largest emissions growth sector, the cost of removing a ton of carbon in Canada is higher than in the U.S.

Canada’s next move in early 2012 was to regulate new coal-fired emission plants for electricity generation. Its motive was clearly stated in the Regulatory Impact Assessment published at the time: “The Government of Canada is also following an approach to climate change that is broadly aligned with that of the U.S.” Coming into effect in July, 2015, the regulations apply a performance standard to new coal-fired generating units and old units that have reached their end of useful life.

So far — to 2012 — alignment was not unduly hampering Canadian climate policy. However, this changed with President Obama’s re-election in 2012 and his renewed commitment to act on climate change in his second term. Two new sets of EPA regulations dealing with carbon pollution from coal plants followed in swift succession, setting standards for emissions from both new builds and existing coal-generated electricity facilities.

The difference is not so much in approach — both countries are relying on performance standards set by regulation rather than overt carbon pricing regimes — as it is in focus, scale and impact. U.S. efforts are focusing on its major source of carbon emissions — coal-fired generating plants — and are taking it a long way toward achieving its 2020 target. Canada cannot say the same.

Canada has adopted a broad definition of alignment — but not necessarily harmonization. Alignment in targets is not proving to be harmonization in terms of the timetable, measures, or progress towards targets.

Three factors explain this. Canada simply does not match the U.S. on our energy and electricity-producing sectors profile, GHG emissions sources and oil and gas sector growth, and the cost of reducing emissions. These differences were not enough to stifle alignment but have proved sufficient to stall harmonization. Let’s take each in turn.

First, energy sources. Canada’s predominant generation fuel is hydro, accounting for 63 per cent of electricity generation in 2013 compared to only 7 per cent in the U.S. On the other hand, coal accounted for 41.5 per cent of generation in the U.S. compared to only 15 per cent in Canada. Still important in Canada, it proportionately contributes over two and half times as much emissions in the United States.

Second, GHG emission sources and oil and gas sector growth. While both countries share the same amount of emissions from transportation (28 per cent) and agriculture (10 per cent) a starker difference emerges on electricity and power generation emissions. In the U.S., 32 per cent of carbon emissions came from this sector, compared to about 13 per cent in Canada.

The oil and gas sector sector accounts for almost a quarter of Canadian emissions but only about 6 per cent of American emissions. To compound matters, emissions from the oilsands sector are forecast to grow about 65 per cent from 2005 to 2020, virtually swamping growth in all other sectors of the economy. Put another way, emissions from the electricity sector are forecast to decline by 38 Mt while oilsands emissions are to rise by the exact same amount, cancelling any gains.

Taken together, the differing energy and emissions profiles and trajectories add up to the third factor: cost. With most of our energy and electricity production already running clean, and with oilsands growth the single-largest emissions growth sector, the cost of removing a ton of carbon in Canada is higher than in the U.S. Many (although not all) of the low-cost reductions with a carbon price of $50 per tonne or less are spoken for; to reduce carbon emissions from the oilsands likely would require very expensive technology such as carbon capture and storage, with carbon prices exceeding $100 per tonne. In short, Canada must make a trade-off: either higher costs and more emission reductions, or lower costs and fewer emission reductions.

Policy is now firmly constrained by politics. A new federal government taking office next year would find itself in exactly the same position the Harper government inherited in 2006: There’s not enough time to meet the targets at an acceptable economic cost.

Put these elements together and several conclusions are now obvious:

First, the U.S. is going faster and further on emissions reductions than Canada. Combined with lower economic growth and resulting emissions during the recession, it has a much better chance of achieving its 2020 target than does Canada.

Second, the U.S. is going after its biggest carbon emitting sector — coal power plants — while Canada will not move on its biggest and fastest growing carbon-emitting sector — oil and gas and the oilsands — until and unless the U.S. does so “in concert” (as the prime minister put it) with Canada. “The integration of our economies suggest our countries should be taking action together, not alone,” said Environment Minister Leona Aglukkaq. Regulations first promised in 2008 are nowhere in sight.

Third, the policy of alignment — whether it’s phrased as ‘harmonization’ or working ‘in concert’ — is not proving to be a viable pathway to achieving targeted carbon emission reductions in Canada and is demonstrably shackling Canadian action.

The perceived competitiveness risk to Canada of taking action — dampening economic growth in the oil and gas sector and imposing higher energy costs on businesses — has won out over the need to meet the Copenhagen target. The unanticipated economic cost of delaying those actions — manifesting itself in the Obama administration’s deep reluctance to approve the Keystone XL pipeline — was not taken into account. Canada continues to export its unconventional crude oil to refiners at a price discounted from what it would have been able to gain with KXL in place.

Delay in acting on reducing emissions means that a higher carbon cost will be paid in the future to meet targets quickly, instead of transitioning over a decade or longer. That doesn’t even take into account the effect on climate change of pumping a higher volume of carbon into the atmosphere in the meantime.

But policy is now firmly constrained by politics. A new federal government taking office next year with the aim of hitting Canada’s 2020 target would find itself in exactly the same position the Harper government inherited in 2006 when it had six years to meet Canada’s Kyoto target. There’s not enough time to meet the targets at an acceptable economic cost. The cycle would simply repeat itself.

So what do we need? A Canada-first climate policy with a realistic GHG emission target extending beyond 2020. We need to de-link from the United States, which would open up more viable options for reducing our own emissions on a realistic timetable. Dropping the 2020 target would give us more time to get those emissions reductions at a more acceptable economic cost.

This is heresy today to all sides of the climate debate: environmentalists, liberals, social democrats and conservatives. But it’s also inevitable. Next year’s COP 21 climate conference in Paris falls just after the expected election here. Our next government cannot avoid a decision.

David McLaughlin is strategic adviser on sustainability at the University of Waterloo. He is a former president and CEO of the National Round Table on the Environment and the Economy. Eryn Stewart, a Bachelor of Environment student, assisted with research for this article. [email protected]

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